Characteristics of Business Environment

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Characteristics of Business Environment

The major characteristics of the business environment are complex, dynamic, mutual relationship, uncertain, far-reaching impact, multi-faceted, relativity, and internal and external forces.

1 . Complex

The business environment comprises many factors. They all are related to each other. Therefore, their individual effect on the business cannot be recognized properly. This is perhaps the reason which makes it difficult for the business to face them. It is difficult to guess the factors that constitute a given environment. Thus, the business environment is very complex.

2. Dynamic

Business environment is dynamic. It is the sum of many factors and changes in some or the other factors continue to take place. The environment does not remain constant, keeps on changing forever. It provides opportunities and threats to business organizations.

3. Mutual relationship

Business environment comprises many factors such as owners, board of directors, employees, organizational culture, competitors, customers, suppliers, regulators, strategic allies, political-legal, economic, socio-cultural, and technological. They have mutual relationships. The such relationship makes the business environment very complex.

4. Uncertain

Business environment is largely uncertain. It is difficult to predict future happenings. No one can predict what is going to happen in the future. Anything can happen, anytime. For example, the pace of technological changes is very fast. Nobody can anticipate the possibility of these swift technical changes. It is an inherent characteristic of the business environment.

5. Far-reaching impact

The impact of the business environment is far-reaching or long-lasting. The survival, growth, and profitability of a firm depend on the environment in which it exists. A small change in the environment has a far-reaching impact on the organization. The impact may be negative or positive.

6. Multi-faceted

Same forces of the business environment affect different firms in different ways. This is frequently seen when the same development, says liberalization, is welcomed as an opportunity by one firm while another firm perceives it as a threat. Impact and perception regarding environmental changes can be different.

7. Relativity

The business environment is relative in nature. It differs from country to country and even region to region. For example, religious beliefs, political conditions, government policies, etc. differ from country to country.

8. Internal and external forces

Business environmental forces can be divided into two categories- internal and external. They are also known as micro and macro forces. Owner, board of directors, employees, and culture are internal forces and task environments such as competitors, customers, suppliers, regulators, and strategic allies and general environments such as political-legal, economic, socio-cultural, and technological (PEST) are external forces.

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